HighPeak Energy Inc. seeks to raise millions of dollars through a public offering to shore up its near-term liquidity.

The Midland Basin E&P priced an underwritten public offering to raise $135.5 million, before deducting discounts, commissions and other expenses, HighPeak said in a July 19 press release. The company plans to offer 12.9 million shares priced at $10.50 each. The offering is expected to close on July 21.

HighPeak needs to raise equity financing in order to receive debt waivers, which would increase the chance of getting some form of refinancing completed, Truist Securities Managing Director Neal Dingmann wrote in a July 18 market note.

In late June, HighPeak said it was evaluating multiple financing arrangements to refinance some of its short-term debt.

As of the end of the second quarter, HighPeak had accounts payable of approximately $216.1 million—around $121.3 million of which is either currently due or past due, the company disclosed in a June 18 filing with the Securities & Exchange Commission.

HighPeak anticipates paying off part of its near-term debt using a portion of the proceeds from the stock offering.

The company also plans to repay short-term debt with $81.7 million in crude oil sale proceeds that HighPeak expects to receive on July 20, regulatory filings show.

HighPeak has a total of around $1 billion in indebtedness scheduled to mature in 2024, including $225 million in February notes, $250 million in November notes and $527.4 million outstanding under the company’s credit agreements.

The company needs to raise at least $95 million from selling its equity securities in order to receive debt waivers for future potential refinancing, Dingmann wrote.

“We believe today’s announcements highlight the difficulty for the company to find a go forward liquidity solution and highlight the continued challenges of the existing/future operations,” Dingmann wrote.

Truist Securities’ assessment of HighPeak’s near-term liquidity, as well as updated estimates and production adjustments, points to “an increasingly plausible scenario” where the company defaults on its February 2024 notes.

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Strategic alternatives

As HighPeak works to improve its financial runway, the E&P is also exploring strategic alternatives to boost shareholder value—including a potential sale.

The company retained Credit Suisse Securities and Wells Fargo Securities as financial advisers for the strategic alternative process. However, the process “has been exploratory in nature and accordingly remains in preliminary stages,” HighPeak said in its prospectus filing.

The bulk of HighPeak’s Midland Basin acreage position is located in the eastern portions of Howard and Borden counties, Texas.

As of March 31, HighPeak’s position included 112,745 net acres, around 61% of which were held by production, according to the company’s latest annual report.

HighPeak Rextag
The majority of HighPeak Energy’s acreage in the Midland Basin is located in Borden and Howard counties, Texas. The company has smaller footprints in Scurry and Mitchell counties, Texas. (Source: Rextag)

Earlier this year, HighPeak slashed its drilling plans in an effort to reduce spending. The company dropped its rig count from four rigs to two rigs from June through the end of the year.

HighPeak said the scaled-back drilling program would reduce its 2023 capital spending by around $250 million from its original budget.

The company expects its 2023 capex to range between $900 million and $975 million for drilling, completion, facilities and other costs, plus another $50 million to $60 million for field infrastructure buildout.

HighPeak has not finalized its second-quarter financial and operational results, but the company estimates that production ranged between 41,000 boe/d and 43,000 boe/d during the quarter—up from 37,200 boe/d in the first quarter.

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